Chapter Three W.A. Inc.: Why Didn't We Hear The Alarm Bells? Bevan Lawrence Copyright 1994 by The Samuel Griffith Society. All rights reserved. People for Fair and Open Government (PFOG) was established in Western Australia in the winter of 1989 following the re–election of the ALP Government in February, 1989. We lobbied for a Royal Commission of Enquiry into what had then become known as WA Inc. This was a general reference to a number of financial arrangements which the Government had made with business which many in our community viewed as improper. The lobby group came into existence because neither the press nor the Parliament had been able to uncover or stop any of these improper transactions. It believed that there had been a significant cover–up of these improper deals, including what became known as the Rothwells Petrochemical deal. PFOG was hopeful that if the Government was exposed, further public funds would not be wasted. It failed in that objective but ultimately, in November 1990, a Royal Commission of Enquiry was called by the then Premier of Western Australia, Dr Carmen Lawrence, into the major transactions. This Commission of Enquiry was called when the ALP Government's voter support plunged to an all time low of 22 per cent, when the West Australian Ombudsman had called for a public enquiry following dramatic revelations in a court case, and when evidence was adduced through two Legislative Council parliamentary committees, and after The West Australian newspaper had finally campaigned for such an enquiry for about three weeks. The terms of reference were roughly in line with the terms of reference which PFOG delivered to the Premier in May, 1990. The Royal Commission began with the support of the general community. While some criticisms and complaints were made during the enquiry, PFOG was generally supportive. Part I of its Report, which included all its findings of fact, was published on 20 October, 1992. The general community was supportive of its major findings, which appeared to be fairly based on the evidence. There was, no doubt, more to be uncovered but the public nature of the enquiry had exposed the essential features of the impropriety. Part II was published three weeks after Part I. This Report was made pursuant to the terms of reference of the Royal Commission which required the Commission "to report whether changes in the law of the State or in administrative or decision making procedures are necessary or desirable in the public interest". At the time Part II was published, a core group of those active within PFOG were both surprised at some of the recommendations and concerned that such recommendations did not fairly flow from the facts which had been uncovered by Part I. We felt that too little attention had been paid to the role of the Executive and that the Report had not in any way attempted to curb or control the power of the Premier and the Ministers either individually or collectively. The Commissioners reported that "the allocation of ministerial responsibility both individually and collectively is for the Parliament to exact and for the electorate to judge, not for this Commission to pronounce upon". I strenuously disagree with this statement. Surely the very task of the Commission was to report whether changes in administrative or decision making procedures are necessary or desirable in the public interest. If the Commissioners thought that such a task was outside their terms of reference, then we in the community surely now have a duty to undertake the task of ensuring that we bring the Executive under control so that it will in the future act lawfully and in the interests of the citizens of this State. In determining how to prevent a recurrence of the abuse of power and the impropriety uncovered by the Royal Commission, I believe it is necessary to ask: Why was it that information did not become public at the time to expose these deals? Did the alarm bells ring? If they did, did anyone heed them? What is required to ensure that such impropriety does not happen again? Today, I will examine some of these transactions. I will refer to the public reaction at the time the deals were done, and then provide my own analysis of how this now disgraced Government managed to keep much of the impropriety quiet and in the process survived two elections. I will then use that analysis to make my own suggestions. The Acquisition of Northern Mining The Australian Labor Party led by Brian Burke won Government in Western Australia in February, 1983 after ten years in Opposition. One of the platforms of its policy for the election was that the Government would acquire an interest in the fledgling diamond industry in Western Australia. At the time of the election the Argyle diamond venture was to be operated by a consortium of companies (joint venturers). Northern Mining NL had a 5 per cent interest in the project and was effectively controlled by Bond Corporation. The joint venturers were required, pursuant to an agreement with the previous Government, to build a town near the minesite. Shortly after the election the joint venturers made it clear to the Government that they wished to be relieved of this obligation, and they suggested that unless they were so relieved the project could be threatened. Laurie Connell came to hear of this, probably through his employee, the late Jack Walsh, who was also a friend of Brian Burke. At about the same time Connell also became aware that Bond Corporation was anxious to sell Northern Mining NL, as it was having trouble servicing the debt which related to its acquisition. L R Connell and Partners, acting as advisers to the Government, assisted the Government in obtaining an agreement from the joint venturers that in lieu of building the townsite $50 million would be paid over a period of time. At the same time, with L R Connell and Partners acting as its advisers, the Government agreed to acquire Northern Mining NL for $42 million. After conducting its enquiries the Royal Commission found that L R Connell and Partners earned a commission of $5 million from Bond Corporation for the transaction. It found that Mr Burke was well aware that a fee was to be paid by Bond Corporation to L R Connell and Partners and, assisted by one of his political advisers, Burke kept this information from Cabinet, so that Cabinet was unaware that L R Connell and Partners was taking a commission from the vendor at the same time as it was advising the government as to the price it should pay. The Royal Commission found that the price paid was from $7 million to $12 million more than its true value. It is apparent from Royal Commission evidence that the decision to acquire the company was deliberately kept secret from senior civil servants. The transaction was handled by Burke and his political advisers attached to the Department of Premier and Cabinet. Cabinet was advised by Burke that no fee was being paid to Connell and Bond. The Attorney General, Mr Berinson apparently raised a query with Mr Dowding and then penned a hand written note to Burke which said: "I was frankly stunned at the end of our meeting with CONNELL and WALSH to hear that their services to us (though not to others) were without charge. If I understand the position correctly, that means that our primary advice came from agents (salesmen?) for the vendors. If I am wrong in this, I would be pleased. Even if I'm right the decision is made and looks right – and has the express support of our own adviser in the Under Treasurer." Berinson did not send that note and wrote on the bottom of it: "Not sent – but all matters discussed at P/H (Parliament House) 10.10.83. Connell is the organiser of Bond's loans." Subsequently Berinson wrote a note to Burke on 27 October, 1983 which stated: "Observations on the Acquisition 1. I have previously put to you that we were vulnerable to the charge that we failed to get fully independent professional advice. The Opposition has been weak on that, but the criticism will emerge should anything go astray. 2. We must have independent advice in the future and at a level of experience and expertise that is self-evidently adequate." It is unfortunate that Berinson did not take any positive steps to bring his concerns to the attention of the Cabinet. In addition to condemning Burke's role in the transaction, the Royal Commissioners criticised the Opposition parties in the following manner: "The Northern Mining acquisition Bill came before the Legislative Council in a form which would deny accountability in respect of the actions of the Treasurer in the executive department. It is a pity that, notwithstanding that obvious feature, the Opposition, which could have used its numbers to reject the bill or amend it to preserve accountability, failed to do so." I have since read the Parliamentary debates in their entirety. It is apparent that the Legislative Council was of the view that it should not oppose the Bill because it was attached to a Budget requisition and because it was part of the Government's pre–election platform. This was held to be in accordance with established Westminster convention. Although many members of the Opposition spoke in opposition to the Bill both in the Legislative Assembly and in the Legislative Council, their comments were mainly directed to the desirability of the Government being involved in business and whether or not the Government paid a fair price.